Obama’s ego trip

As the Supreme Court hears arguments on the constitutionality of the Patient Protection and Affordable Care Act – Obamacare, as many call it – the justices will probably share at least one assumption: that their decision will have a big effect on the health of Americans. Ideally, everyone ought to have insurance, and it’s popular wisdom that this would significantly improve people’s health. But it’s not true. The law’s fate will dramatically affect government and the health care system; the impact on Americans’ health will be far more modest.

Rarely has a program with so little potential inspired so much contention. Although millions would benefit from health insurance, the overall relationship between people’s insurance status and their self-reported health is underwhelming. Consider a study of Massachusetts’ universal coverage program, enacted under former Gov. Mitt Romney, by economists Charles J. Courtemanche of the University of Louisville and Daniela Zapata of the University of North Carolina at Greensboro. It estimated that about 1.4 percent of the state’s adult population moved into the “very good” or “excellent” health categories.

Another study by economist Daniel Polsky of the University of Pennsylvania examined what happened to uninsured Americans who went on Medicare at age 65. Polsky found “no significant health effect for the uninsured relative to the insured upon reaching Medicare eligibility.” Although other studies report somewhat larger effects, most share a weakness. They rely on people’s self-reported assessment of their health. Just receiving government-subsidized insurance, worth $8,000 to $12,000, may make people feel better. It shields them from financial setbacks.

On reflection, the loose relation between health and insurance is not puzzling. Many uninsured are young and healthy; in 2010, 40 percent were between the ages of 18 and 34. Others pay their own bills or receive “uncompensated” care. Still others are too sick to be cured by any means. Finally, having insurance may not change unhealthy lifestyles or how people use the medical system. Before receiving Medicare, the uninsured used emergency rooms more than the insured; once on Medicare, they still did.

So the laudable goal of universal coverage ought to be balanced against drawbacks. At the margin, the law will probably discourage job creation, because mandated insurance raises the cost of hiring and the complexity of the 2,700-page law will intimidate some employers. Requiring younger workers to have expensive, comprehensive insurance (as opposed to catastrophic coverage) expands the undesirable intergenerational transfer from them to their wealthier elders. Finally, the law worsens the budget outlook.

The Obama administration has obscured this by arguing the program reduces budget deficits. Though technically true, this is misleading.

From 2012 to 2021, the Congressional Budget Office estimates the law’s insurance subsidies at $1.5 trillion. But the CBO reckons these costs will be offset by revenue increases (including: a higher Medicare payroll tax, higher taxes on unearned income, penalties for individuals without insurance, taxes on drug and insurance companies) plus assumed cuts in Medicare. Still, all these tax increases and savings might have been applied to the huge projected deficits that existed before the law. The administration resembled a homeowner who couldn’t afford the mortgage but scraped up money for an expensive renovation. And if the renovation’s costs are underestimated – or all the new money doesn’t materialize – the law will increase the deficit.

To these problems is now added a possible backlash from a Supreme Court ruling. The administration argues that the lawalls within the government’s authority to regulate interstate commerce. Opponents contend that the insurance “mandate” requiring coverage would give government unprecedented power to order Americans to buy almost anything. Unless there’s a lopsided decision (7-2 or better), the court may deepen public polarization over the law.

Considering the law’s glaring – and predictable – economic and political shortcomings, why did Obama make it his first-term centerpiece? The answer seems to be his obsession with securing his legacy as the president who achieved the liberal grail of universal coverage. In his book “The Escape Artists: How Obama’s Team Fumbled the Recovery,” Noam Scheiber recounts a telling incident. Obama’s advisers tell him he can be known for preventing a second Great Depression. “That’s not enough for me,” Obama replies.

The law is Obama’s ego trip, but as a path to presidential greatness, it may disappoint no matter how the court decides. Lyndon’s Johnson’s creation of Medicare and Medicaid was larger, and he isn’t deemed great. And then, unlike now, government seemed capable of paying for bigger programs.